Weineng reported strong results in the first half of the year, with profits up 84.6 per cent year-on-year to HK $263 million. The company added 138.8 megawatts of IBO projects in the first half of the year, achieved surprising SI business sales, and delivered beautiful answers against the challenge of the epidemic in the first half of the year. The Myanmar joint venture project totaling 1.06 gigawatts was also installed and put into production within nine months. We expect that a number of the company's efforts in the first half of the year will pay off handsomely in the second half of the year and significantly accelerate earnings growth, especially from Burmese associates. We reiterate that for the buy rating of Werneng Group, the target price remains unchanged at HK $5.47 per share.
The profit in the first half exceeded our expectations by 7.5%. Revenue unexpectedly rose 70.4% year-on-year to HK $2.05 billion, mainly due to higher-than-expected growth of SI business and steady growth of IBO business. Other income and income amounted to HK $88 million, mainly including consulting income and asset disposal income of 62 million and 14 million respectively. As the company hired more staff to handle LNG-related business, administrative expenses increased by 42.6% year-on-year during the period. Financial costs fell 8.5 per cent year-on-year as debt fell, showing good control of debt costs and leverage (including 74.5 per cent net debt after placement financing in July). The first-half net profit reached HK $263 million, an increase of 84.6 per cent year-on-year and higher than our forecast of 7.5 per cent. The company announced a dividend of HK1.51 cents, corresponding to 14.6% of earnings per share in the first half of the year.
SI business achieved higher-than-expected sales. Revenue from the SI business unit increased by 104.6% year-on-year, which was 96.7% higher than we expected. Management revealed that there was strong demand in China and Asia, while some temporary unit demand in the first half of the year led to rapid revenue growth in the first half of the year. The gross profit of the SI business fell 5.4 percent to 17.6 percent from the same period last year, mainly due to transportation disruption caused by the epidemic, and the company spent additional costs to achieve the delivery of SI units. Management expects SI business sales to return to normal in the second half of the year and SI business to achieve high-unit revenue growth for the whole year.
IBO's business expansion is progressing as scheduled. IBO's gross profit margin fell 8.7 percent year-on-year to 37.7 percent, mainly due to the company's addition of operating units in Brazil, including fuel costs. In addition to this factor, management explained that the gross profit margin of most projects excluding fuel costs in Asia remained stable. The Myanmar joint venture project achieved a profit sharing of HK $23 million in less than a month of operation, once again confirming the profitability of the project.
Looking forward to the second half of the year, we expect the IBO business to contribute to sustained and steady operating profit growth, and the Myanmar joint venture project will bring a profit-sharing contribution of HK $310 million for the whole year.
Earnings growth accelerated in the second half of the year, reiterating the buy rating. We do not adjust our profit forecasts and target prices.
We believe that the company's profit release in the second half of the year has a high visibility. The company is currently valued at 10.8 times forecast earnings in 2020 / 21, which is significantly undervalued. After a sharp correction in the share price, we think now is a good time to buy.
